Lululemon Results a Little Out of Shape

Lululemon Athletica Inc. (NASDAQ: LULU) reported adjusted second-quarter earnings per share (EPS) of $0.34 on $282.6 million in revenue before markets opened today. In the same period a year ago, the yoga exercise clothing maker reported EPS of $0.26 on revenue of $212.13 million. Second-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.31 and $282.34 million in revenue.

The company's CEO said:

We continue to strive for the right balance between strong growth and maintaining our market leader focus on execution, innovation and investments in infrastructure and while doing so delivered another strong quarter.

The company forecast third-quarter revenue in the range of $300 million to $305 million based on a same-store sales increase in the low to mid-teens on a constant dollar basis. The company expects EPS in the range of $0.34 to $0.36. For the full 2012 fiscal year, Lululemon forecasts revenue of $1.345 billion to $1.36 billion and EPS in the range of $1.76 to $1.81. The consensus estimates for the third quarter of 2012 call for EPS of $0.33 on revenue of $300.12 million. Full fiscal year 2012 estimates call for EPS of $1.62 on revenue of $1.35 billion.

Same-store sales rose 15% in the second quarter and Lululemon reported an increase of 20% in same-store sales through the first six months of the year. Gross margins are somewhat lighter than the same period a year ago, now at 55.1% compared with 57.5% in the second quarter of 2011. For the first six months of 2012 gross margin totaled 55.1% compared with 58.1% in the first half of 2011.

Sliding margins and forecasts near the bottom of the consensus ranges are likely to give investors pause today.

The company's shares are down about 3.8% at $65.98 in premarket trading this morning, having closed last night at $68.60. The current 52-week range is $41.70 to $81.09. Thomson Reuters had a consensus analyst price target of $74.79 before today's results were announced.